In a move to give a push to the slumping economy, the Reserve Bank of India (RBI) slashes its Repo Rate for the third time in a row to 5.75% on Thursday. From now onwards, auto loans, home loans, mortgages and other lending are going to be cheaper. The RBI also gave signalled at more cuts in future as it is shifting its monetary policy stance to “accommodative” from “neutral”.
What is Repo Rate?
- It is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks whenever they face financial crunches and are not able to bear their expenses.
- It is used to control inflation by monetary authorities.
- The banks can borrow money from RBI for a time duration of 7 to 14 days.
Impact of Cut on Repo Rate
- This reduction on the benchmark lending rate for the third time in the last five months will cut the EMIs on auto loans, home loans and even personal loans. Further, it will lessen the burden of debt repayment on corporate.
- With the latest cut by the central bank of the country, it has now come down to 5.75%. Last time, it was in 2010 when it was at 5.75%.
Effect of High and Low Repo Rate
- Higher the Repo Rate, higher will be the cost of short-term money
- Lower the Repo Rate, Lower will be the cost of short-term money.
- Higher Repo Rate means that there would be a slowdown in the economic growth and vice versa
Impact on Real Estate
The entire real estate lobby has welcomed the move with their arms wide open. Slash in Repo Rate directly impacts the home loan EMIs. Those who were in a dilemma or refraining themselves from buying a home or investing in the real estate sector will now have reasons to come forward. The move will help the real estate investors in stitching the hole in their pockets.